Clients Need a Coach in the Investment Game

Days have turned into weeks and weeks have turned into months of uncertainty; and markets dislike uncertainty. 

Guess who else isn’t comfortable with uncertainty? Your clients. They too have been tested: mentally and financially. This virus has had a double dose effect on the markets and the people who invest in them. The psychological damage has cut deep. Many market participants were fearful on a few fronts before we locked down our country. Now, we see food supplies being disrupted, individual and corporate bankruptcies rising, and commercial real estate barely treading water.

Make no mistake about this, this is a time that will be looked back on and discussed for decades to come. As an advisor, you are in the middle of this mayhem and you’re expected to captain the ship through uncharted waters. I hope this is not the start of a new normal, but it might be, even though this is anything but normal.

On 4/17/2020 the Conference Board released the index of Leading Economic Indicators report. (LEI). That report showed the LEI declined 6.7% in March which is the largest decline in the 60 year history of data. This is signaling a severe pull back of economic activity that will most likely end in an economic contraction. In other words, a potential recession. 

To stop the free fall of markets, the locking up of credit, and the dislocation of value from price, the Federal Reserve stepped in at unprecedented levels to stem the losses. In doing so they’ve expanded their balance sheet to over $6.3 trillion last recorded on 4/15/2020, up from $4.175 trillion on 12/25/19. The last time they increased their assets by $2 trillion it took almost 5 years.* 

Additionally, Congress passed a stimulus package of $2.2 trillion that included a payout to individuals and families who qualified to the tune of roughly $300 billion. Another $350 billion of that package was the Payroll Protection Program, PPP, which went toward small businesses with less than 500 employees. Not to mention the hundreds of billions they injected into the repo market to reduce risk for the banks. All of this market manipulation has caused markets to rebound over 50% off the lows set in March. And as I write an additional stimulus package for $450 billion to boost the small business loan program is in the works for small businesses and hospitals that separately need funding. This is all great, but will it stick? 

Clients are more knowledgeable than ever before. They’re thinking, if all of this stimulus is needed then how bad is it?  

All of this leads to more uncertainty and it takes a toll on the investing public’s confidence. This is where you as the advisor need to step up your game. Not only your investing game, but your coaching game as well. You see, investors are looking for someone to pour their confidence into as they allow you to run their accounts during this tumultuous time. They hired you to help them achieve their goals. Neither of you signed up to navigate a coronavirus pandemic. In fact, this wasn’t even in the realm of possibilities when they filled out their risk tolerance form. But it is here and it is leaving its mark as a Black Swan event. 

Emotions become a risk in this type of market. When emotions get involved people make mistakes, even advisors. A negative bias takes over and we start to weight the possible negative outcomes heavier than the possible positive ones. Use this time to call your clients and give them reassurance that you are there for them. If you shy away from calling your clients, another advisor will contact them instead. Don’t let that happen. 

Earlier in this post I pointed out the possibility of a recession, but that is only a possibility. If it is possible, then have a game plan for it and go to the playbook of what happens in a recession. And coach your clients ahead of time. Don’t call a timeout during the game, bring your client over to the bench and draw up a new play, people have a hard time reacting to surprises. This is basic Managing Expectations 101. You have your planning tools, your asset allocation, your knowledge of the people themselves and everything you need to get through this chaotic time.

Time to Prospect

Additionally, if you’ve done a good job of managing expectations of your clients, then use this time to prospect for new clients. Believe me, many advisors are hypnotized by these markets and feel it is not the time to make these calls. If you keep your head, make the calls to your prospects, and ask them what their game plan is if A, B or C occurs, you’ll stand out from the crowd. 

People look for leaders in times of trouble. Be the leader for your clients and for your future clients. They’ll thank you for it by staying loyal for years to come. 

*2/9/11 = 2.5 Trillion to 12/17/15 4.5 trillion took  almost 5 years to increase by $2 trillion.

Scroll to Top